Asstt.CIT,Cir-8, Nagpur V. M/s Nathuram Agrawal, Nagpur

ITA 177/NAG/2012

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3584 (ITAT-NAGPUR)
• Duration Of Justice: 4 year(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 31-05-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 16-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P G MUDLIAR
• Assessee Lawyers: ABHAY AGRWAL
• Keywords: Tax effect

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH: NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 177 /NAG/20 1 2 ASSESSMENT YEAR: 200 6 - 07 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE - 8, 5 TH FLOOR, AMBED KAR BHAWAN, SEMINARY HILLS, NAGPUR - 440006 VS SHRI NATHURAM AGRAWAL 107, VIMAL COMPLEX, GHAT ROAD, NAGPUR - 440018 PAN: - AAEFN4625J (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S.P.G.MUDLIAR , D.R. RESPONDENT BY SHRI ABHAY AGRWAL , A.R. I.T.A. NO. 334 /NA G/201 2 ASSESSMENT YEAR: 200 6 - 07 SHRI NATHURAM AGRAWAL 107, VIMAL COMPLEX, GHAT ROAD, NAGPUR - 440018 PAN: - AAEFN4625J VS DY. COMMISSIONER OF INCOME TAX, CIRCLE - 8, 5 TH FLOOR, AMBEDKAR BHAWAN, SEMINARY HILLS, NAGPUR - 440006 (APPELLANT) (RESPONDENT) APPEL LANT BY SHRI ABHAY AGRWAL , A . R . RESPONDENT BY SHRI S.P.G.MUDLIAR , D . R . DATE OF HEARING: 31 - 0 5 - 201 6 DATE OF PRONOUNCEMENT: - 15 / 0 6 /2016 O R D E R PER SHAMIM YAHYA , A .M. THESE ARE CROSS APPEAL S BY THE REVENUE AND THE ASSESSEE ARISING OUT OF ORDER O F LD. CIT(A) DATED 10.01.2012 PERTAINING TO ASSESSMENT YEAR 2006 - 07. 2. IN REVENUES APPEAL GROUNDS OF APPEAL READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ADOPTING THE INCOME BEFORE ALLOWING INTEREST AND SALARY TO PARTNERS @8% OF GROSS RECEIPTS WITHOUT CITING ANY REASONS. 2 I TA NO. 177 & 334 /NAG/201 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN IGNORING THE FACT THAT THE ASSESSED INCOME IS 12.78% OF GROSS RECEIPTS INSTEAD OF 13.58% BEFORE ALLOWIN G INTEREST AND SALARY TO PARTNERS AS CONSIDERED BY HIM WHILE ESTIMATING THE INCOME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN IGNORING THE FACT THAT THE ASSESSEE DID NOT DEDUCT TAX ON TRANSPORTATION CHARGES OF RS.6,9 1,933// - LIABLE FOR DISALLOWANCE U/S.40(A) (IA) AS POINTED OUT IN REMAND REPORT. 3. IN ASSESSEES APPEAL GROUND OF APPEAL READ S AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) HAS ERRED IN ADOPTING THE INCOME BEFO RE ALLOWING INTEREST AND SALARY TO PARTNER @8% OF GROSS PROFIT AS AGAINST THE NET PROFIT SHOWN BY THE ASSESSEE. 4. THE ASSESSEE IN THIS CASE EARNED INCOME FROM CONTRACT B USINESS. THE AO IN ASSESSMENT ORDER NOTED THAT REGULAR BOOKS OF ACCOUNT HAVE BEEN MA INTAINED WHICH ARE AUDITED AS REQUIRED U/S.44AB OF THE I.T. ACT. AO FURTHER OBSERVED THAT THE ASSESSEE WAS ISSUED NOTICE IN CONNECTION WITH SUBMISSION OF CERTAIN DETAILS. AO WAS NOT SATISFIED WITH ASSESSEE S SUBMISSION. HE HELD AS UNDER : - SINCE, ASSES SEE DOES NOT HAVE BASIC MINIMUM SUPPORTING DOCUMENTS AND DETAILS TO CLAIM EXPENDITURE, THE DEFENCE TAKEN BY THE ASSESSEE DOES NOT HAVE ANY MERIT. ASSESSEE HIMSELF HAVE STATED THAT HE DOES NOT HAVE ANY BILLS AND SUPPORTING FOR TRUCK AND TRACTOR EXPENSES WHI LE, HE DOES NOT HAVE COMPLETE SUPPORTING FOR LABOUR AND METAL BREAKING CHARGES. HOWEVER, I AM NOT COMPLETELY DISALLOWING THESE EXPENSES. ASSESSEE MUST HAVE INCURRED CERTAIN EXPENSES DURING HIS BUSINESS OPERATIONS. TO BE FAIR TO THE ASSESSEE AND KEEPING THE INTEREST OF REVENUE I DISALLOW 15% OF LABOUR EXPENSES OF RS.20278878/ - WHICH COMES OUT TO BE RS.3041831/ - ALSO, I DISALLOW 15% OF METAL BREAKING CHARGES OF RS. 2506491/ - WHICH COMES OUT TO BE RS.250650/ - . I DISALLOW 50% OF TRACTOR EXPENSES OF RS.200877/ - WHICH COMES OUT TO BE RS.100438/ - ; SINCE, NOT A SINGLE SUPPORTING DOCUMENT IS AVAILABLE FOR THE TRACTOR EXPENSES. I DISALLOW 50% OF TRUCK EXPENSES OF RS.10141753/ - WHICH COMES OUT TO BE RS.507377/ - SINCE NOT A SINGLE SUPPORTING DOCUMENT IS AVAILABLE FOR TH E TRUCK EXPENSES. 3 I TA NO. 177 & 334 /NAG/201 2 5. UPON ASSESSEES APPEAL THE LD. CIT (A) NOTED THE SUBMISSION OF THE ASSESSEE AND ALSO OBTAINED REMAND REPORT FROM AO. THE LD. CIT (A) CONCLUDED AS UNDER: - HOWEVER, THE ACTION OF A.O. IN REJECTING THE SUBMISSION OF THE APPELLANT AND DISALLOWING THE EXPENSES IS IN ORDER BUT AS THE CHART SUBMITTED BY THE APPELLANT INDICATES THE TOTAL DISALLOWANCES RESULT IN NET INCOME OF 13.58% (PROFIT BEFORE INTEREST & SALARY TO PARTNER) FROM A CIVIL CONTRACT WORK. 4.2 DURING THE APPELLATE PROCEEDINGS, APPELLANT PLEADED TO RESTRICT IT TO REASONABLE LEVEL KEEPING IN MIND PAST RESULTS. IT IS TRUE THAT APPELLANT IS CARRYING OUT WORKS FOR RAILWAY, WHICH IS OF NATURE OF CIVIL CONTRACT, HOWEVER, IN FACTS AND CIRCUMSTANCES OF THE CASE, I RESTRICT THE DISALLOWA NCE AND DIRECT THE A.O. OF TAKE THE INCOME AT 8% OF THE GROSS RECEIPT OF RS.35,060,984/ - BEFORE ALLOWING ANY INTEREST AND SALARY TO PARTNERS. 4.3 THE PLEA OF THE APPELLANT THAT KEEPING IN MIND PAST RESULTS OF APPELLANT, IT MAY BE RESTRICTED TO 5.59% LIKE A .YR. 2004 - 05 IS NOT ACCEPTABLE AS IT IS FOR APPELLANT TO MAINTAIN PROPER RECORDS TO CLAIM A CERTAIN PERCENTAGE AS NET PROFIT AND PAST YEARS RESULT ARE OF NO HELP TO APPELLANT AS A.O. HAS BROUGHT THE DEFECTS ON RECORD TO SHOW THAT APPELLANTS CLAIM OF EXPEN SES ARE NOT WELL SUPPORTED BY RELEVANT DOCUMENTS. HENCE, APPEAL OF THE APPELLANT IS PARTLY ALLOWED WHEREBY APPELLANTS NET INCOME IS TO BE TAKEN AT 8% OF GROSS CONTRACT RECEIPTS INSTEAD OF 13.58% (AFTER FACTORING VARIOUS DISALLOWANCE MADE BY THE A.O.) AS D ETERMINED BY A.O. 6. AGAINST ABOVE ORDER REVENUE AND ASSESSEE ARE IN APPEAL BEFORE US. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT ASSESSEE IN THIS CASE IS RAILWAY CONTRACTOR. BOOKS OF ACCOUNT HAVE BEEN MAINTAINED WHICH ARE DULY AUDITED AND AUDIT REPORT ALSO SUBMITTED. NO DEFECT HAS BEEN NOTED IN THE AUDIT REPORT . AO HA S ALSO NOT REJECT ED THE BOOKS OF ACCOUNT SUBMITTED BY THE ASSESSEE; HOWEVER HE H AS NOTED THAT COMPLETE VOUCHERS FOR CERTAIN EXPENSES ARE NOT AVAILABLE. HENCE AO HAS PROCEEDED TO MAKE ADHOC DISALLOWANCE OUT OF THE EXPENSES AND AS A RESULT OF THIS DISALLOWANCE S OF EXPENDITURE , T HE NET INCOME OF THE ASSESSEE HAS COME TO 13.58% FROM CIVIL CONTRACTOR WORK. THE LD. CIT(A) HAS RE DUCED THE SAME TO 8% OF THE GROSS RECEIPT . A SSESSEES PLEA FOR TAK ING IN TO ACCOUNT IN PAST RECORDS AND PAST PERFORMANCE OF THE ASSESSEE AND RESTRICTING THE 4 I TA NO. 177 & 334 /NAG/201 2 PROFIT TO 5.9% AS IN A.Y.2004 - 05 HAS NOT BEEN ACCEPT ED BY THE LD. CIT(A). THE LD. CIT(A) HAS NOT BROUGHT COGENT REASONS FOR DIS REGARDING THE PAS T RESULTS OF THE ASSESSEE. ADMITTEDLY , IN THIS CASE IN THE GARB OF MAKING DISALLOWANCE F OR UNSUPPORTED EXPENDITURE, AUTHORITIES BELOW HAVE REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. IT IS SETTLED LAW THAT WHEN BOOKS OF ACCOUNT ARE TO BE REJECTED THE SA ME HAS TO BE DULY STATED IN THE ASSESSMENT ORDER. H OWEVER THE REVENUE AUTHORITIES HAVE CHOSEN NOT TO FOLLOW THIS SETTLED LAW. FURTHERMORE, WE NOTE THAT WHEN BOOKS OF ACCOUNT ARE REJECTED AND ESTIMATE O N PROFIT IS DONE WHICH IS PRECISELY THE CASE , T HE PAST RESULT OF THE ASSESSEE WHICH ARE ON RECORD OF THE REVENUE HAVE ALSO TO BE TAKEN INTO ACCOUNT. WE DID NOT FIND ANY SPECIFIC FINDING IN THE ORDER OF THE AUTHORITIES BELOW AS TO WHY PAST PERFORMANCE OF THE ASSESSEE SHOULD BE IGNORED. WE NOTE THAT THE PARTICUL ARS GROSS PROFIT AND N ET P ROFIT OF THE ASSESSEE AS NOTED IN LD. CIT(A) ORDER IS AS UNDER: - A.Y. GROSS RECEIPT GROSS PROFIT NET PROFIT NET PROFIT BEFORE INTEREST & SALARY TO PARTNER AMOUNT % AGE AMOUNT % AGE AMOUNT % AGE 2006 - 07 35,060,984.00 2,330,79 3.00 6.65 507,378.08 1.45 859,565.68 2.45 2005 - 06 19,021,179.29 2,063,520.29 10.85 467,729.80 2.46 724,567.60 3.81 2004 - 05 9,369,593.00 1,096,757.97 11.71 164,889.48 1.76 523,378.48 5.59 7. FROM THE ABOVE, IT IS CLEAR THAT THE PROFIT WHICH HAS BEEN EST IMATED BY THE LD. CIT(A) IS NOT IN CONSEQUENCE WITH THE PAST RESULT OF THE ASSESSEE. IN OUR C ONSIDERED OPINION AN ESTIMATE OF PROFIT HAS TO BE REASONABLE AND IT CANNOT BE A FIGURE B A S ED UPON SURMI SES & CONJUNCTURE . NO CASE HAS BEEN MADE OUT THAT PAST RESUL TS OF THE ASSESSEE ARE NOT RELIABLE. WE NOTE THAT THE PA S T PERCENT AGE OF PROFIT AS ABOVE WARRANT S THAT AN ESTIMATE O F PROFIT AT 6 PERCENT PROFIT SHOULD MEET THE END OF JUSTICE. ACCORDINGLY WE DIRECT THAT INSTEAD OF 8 PERCENT OF PROFIT AS DIRECTED THE LD. C IT(A) , INCOME SHOULD BE TAKEN AT 6% PERCENT OF THE GROSS RECEIPTS BEFORE ALLOWING INTEREST AND SALARY TO PARTNER . 5 I TA NO. 177 & 334 /NAG/201 2 8. IN THE RESULT, ASSESSEE APPEAL IS PARTLY ALLOWED AND REVENUE APPEAL STANDS DISMISSED. 9. WE HAVE ALSO NOTE D THAT THE TAX EFFECT IN THE R EVENUE APPEAL HAS BEEN CLAIMED BY THE LD. COUNSEL OF THE ASSESSEE TO BE BELOW THE LI MIT FIXED BY THE CBDT FOR FILING APPEAL BEFORE THE ITAT AS PER OPERATIN G CBDT CIRCULAR IN THIS REGARD . H OWEVER SINCE WE HAVE ALREADY DECIDED THE ISSUE P ARTLY IN FAVOUR OF T HE ASSESSEE, T HE REVENUE APPEAL ALREADY STANDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF JUNE , 2016 SD/ - SD/ - (MUKUL K. SHRAWAT) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: - NAGPUR DATED: - 15 / 0 6 /2016 COPY FORWARDED TO : 1. SHRI NATHURAM AGRAWAL 107, VIMAL COMPLEX, GHAT ROAD, N AGPUR - 440018 2. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE - 8, 5 TH FLOOR, AMBEDKAR BHAWAN, SEMINARY HILLS, NAGPUR - 440006 3. C.I.T. - IV, NAGPUR. 4. CIT (APPEALS) - II, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR M.B.BODKHE /SR. P.S.